Special assessments are a funding method used to address a financial shortfall for a temporary period. The amount and collection period are determined by the urgency of the situation.
A special assessment is one of three ways that a condo corporation obtains funds to perform the duties required of the condo corporation. The other two ways to obtain
funds are monthly condo fees and taking a loan from a financial institution.
A board of directors has discretion to levy a special assessment to pay for necessary maintenance, repairs or other work. Once assessed, all condo owners in the corporation are obligated to pay their portion of the special assessment. Those unable or refusing to do so risk having a lien placed on their home. For some, loss of their home is a risk.
Condo boards have authority to impose a special assessment without consultation with, or a vote by, owners.
A special assessment may be the result of condo corporations not charging owners enough to pay for the maintenance and upkeep of their building. It is an obligation upon current owners who have benefited from residing in and utilizing the asset that is their building. The special assessment represents monies that should have been collected from condo owners in prior years. Some consider special assessments to represent failure by the condo corporation to manage its finances.
A special assessment appears on the condo corporation’s Status Certificate and may impact on the resale value of suites.
Some feel that the occasional special assessment is a way to finance ongoing operations and preferable to higher common expense fees.
Condo corporations that have taken this approach choose to place an undisclosed burden upon newer owners. Individuals who have sold their condo and moved on have enjoyed the benefit of owning a unit in the building for several years without making the contributions necessary to maintain the building. If the financial plan for a condominium is to levy large special assessments when the time comes for major repairs, a status certificate disclosure would be appropriate.